Like how it was in November, trading in the first week of December had a bad start. The market sustained a weekly loss equivalent to 193.88 points or 3.12 percent as the market closed at 6,014.94.
In comparison, the market’s net loss for the week was slightly lower than what it suffered in the first week of November of 230.20 points or 3.5 percent.
Just the same, the market fell lower in both periods obviously driven by the same factor influencing investors’ sentiments the world over. This was the quandary brought by the plan of US officials to reduce the $85-billion monthly bond-buying stimulus program for the American economy.
Considered by most economists as a palliative than a real approach to grow a robust economy, the stimulus plan or Quantitative Easing (QE) program is still considered to have contributed to the uptick of corporate profits in business and a continuing incentive to active trading on Wall Street.
Good news
In the report issued by the US Labor Department last Friday, the jobless rate in the United States for November fell to its lowest level in five years since 2008. In particular, some 203,000 jobs were added during the month.
This now appears to confirm the improving employment trend in the US labor market. Not too long ago, the US Labor Department reported that there were only about 89,000 new jobs created in July. But since then, things seemed to have changed dramatically in August and September. The numbers increased to more than double. New jobs created rose to 200,000. Following some revisions, the number of new jobs for the month of October also added up to 200,000.
In November, about 80 percent of US investors believed that the Federal Reserve will not take up the subject of tapering, not until its scheduled meeting in March 2014. Only 20 percent felt that it might be taken up this December.
Now, because of this improving report on the jobs market—an all-important indicator on the health and state of the economy—some observers feel that this might just make the Federal Reserve to decide on its Dec. 17-18 meeting to taper the QE program.
This observation is further bolstered by positive findings that the gross domestic product (GDP) of the US for the third quarter grew—on an annual basis—by 3.6 instead of 2.8 percent, as initially gathered. Noteworthy in the growth findings were the recent uptick on the manufacturing front along with the observation that withstanding the 16-day government shutdown, damage to the economy was limited.
There is disagreement among experts, however, in what may constitute as the “magic number” of payroll record and new jobs data that would corroborate a signal to taper. There were some initiatives made in early 2011 and 2012 based on similar considerations but these all petered out.
Some experts believe that a 50-percent increase in the current numbers would represent a good basis for the decision to taper—and consequently terminate—the stimulus program.
Bottom-line spin
Tapering the stimulus program may really soon happen judging from growing US economic fundamentals and recent US investors’ sentiments. Out of this general scenario, however, some businesses in some market sectors will still outperform. For instance, our local oil companies are in the throes of earning again big money out of the resumption of oil production in the Galoc oil field.
In a disclosure submitted last Friday by the participating members of the Galoc area of Service Contract SC 14C, production has commenced last Dec. 4. As disclosed, drilling was “completed on Nov. 28, exactly 14 months as originally programmed and budgeted.” The Galoc oil field has produced more than 11 million barrels of oil when commissioned in 2008. With the addition of oil wells 5H and 6H, recovery from the field “is to be approximately 25 million barrels of oil with end-of-field extended beyond 2020.” Production will initially flow “at 14,500 barrels of oil a day and is expected to be operated at 12,000 barrels a day from four wells forward.”
Members of the consortium are as follows: “Otto Energy Ltd., 33 percent; Galoc Production Co. No. PTE Ltd (a wholly owned subsidiary of Kuwait Petroleum Exploration Co.), 26.8443 percent; Nido Petroleum (Galoc) Pty. Ltd., 22.87952 percent; Oriental Petroleum and Minerals Corp. and Linapacan Oil Gas and Power Corp. (wholly owned subsidiary of OPM), 7.78505 percent; Philodrill Corp., 7.21495 percent and Forum Energy Philippines Corp. (listed Philex Petroleum Corp. (PXP) owns 60.45 percent of Forum Energy), 2.27575 percent.”
One sector that could also outperform is the gaming sector. On recently published reports, the country has estimated gaming revenues of $2 billion. This is less than half of Singapore’s reported gross revenues of $5.9 billion in 2012 which, in turn, was only a sixth of Macau’s total revenues of $38 billion in the same year.
The possibility of the Philippines overtaking Singapore in the gaming business is “within striking distance,” according to principals of listed Melco Crown (Philippines) Resort Corp. But this will depend on how the government will support the industry, they added.
The Bureau of Internal Revenue (BIR) removed the tax exemption given to the four operators developing casinos in the country. It wants to impose a 30-percent income tax on Philippine Amusement and Gaming Corp. (Pagcor) and its licensees on top of a 5-percent franchise tax. In contrast, Singapore has a 5-percent gaming revenue tax on “high rollers” or “those with at least US$80,000 deposit account with the casino operator” and 15 percent for the rest of the patrons.
There are more market sectors and businesses that will outperform but, according to seasoned investors and professional traders, this will depend in your ability to pick the right stocks with promising prospects for growth and value in the long-term.
The writer is a licensed stockbroker of Eagle Equities Inc. You may reach the Market Rider at marketrider@inquirer.com.ph , densomera@msn.com or at www.kapitaltek.com